A Federal Gravy Train May End

It’s been called a federal retirement plan that’s better than the official federal retirement plan, a taxpayer-funded program for government workers that may be ripe for abuse.

But it’s a gravy train that could be brought to an abrupt halt very soon.

Sen. Susan Collins (R-Maine) has filed a request with the Government Accountability Office [GAO], the Congressional watch dog agency, to audit once more the nearly century old federal workers’ disability program, where federal workers get lucrative disability payments. The government lists beneficiaries in their 100s receiving these taxpayer-funded payments.

The program, the Federal Employees’ Compensation Act [FECA], which the government launched in 1916, is supposed to cover lost wages for federal employees who suffer on-the-job injuries.

But many federal workers stay on the program for decades, well into their retirement. Those federal workers on disability can get nearly 75% of their salary tax-free for the rest of their life if they have one dependent, with annual cost of living adjustments.

That compares to regular federal retirees with 30 years of service who get much less, 56% of their gross wages, which is taxable. “FECA has no limits on the amount of time spent in the program or the amount of money given to recipients,” the Senator notes in her statement, and adds: “FECA has no caps or cut-off periods, which is why there are reported cases of recipients in their 90s and 100s still receiving workers' compensation benefits.“

Stunningly, the program does not require regular third-party certifications of continued need for payments, which “expose the FECA program to possible fraud,” the Senator, ranking member on the Senate Homeland Security panel, said in her letter to the GAO.

The senator also indicated in her statement the benefits were even more generous than federal retirement, noting they contain an annual cost-of-living adjustment, where as federal retirement pay does not.

Already, public sector workers make, on average, about a third more than their private-sector counterparts, studies show.

The Congressional Budget Office, a nonpartisan federal research agency, has already made similar findings.

The Labor Department says there are roughly 49,000 purportedly injured federal workers who have not returned to work and who are receiving FECA disability payments to cover lost wages.

Out of those 49,000 recipients, about 7,200 workers are listed as being over age 65 and potentially will not return to work.

Senator Collins says in a statement that the Labor Department unit which oversees the program paid out about $2.8 billion in disability payments over a recent 12-month span, without ensuring whether federal workers employees are exploiting the program.

"At the U.S. Postal Service, for example, 1,000 employees currently receiving federal workers' compensation benefits are 80 years or older,” the Senator adds. “Incredibly, 132 of these individuals are 90 and older and there are three who are 98. This abuse may extend across the government where the Dept. of Labor regularly pays benefits to employees in their 70s, 80s, 90s, and even 100s.”

In her statement, Senator Collins notes she has asked the GAO “to audit FECA and report on the length of time individuals remain on the program, the number of recipients who exceeded the standard federal retirement age, and how the federal program compares to state workers' compensation best practices,” to see if the federal program is more lucrative, in turn hurting federal taxpayers.

"I am increasingly concerned that individuals with no intention of returning to work continue to receive these benefits," said Senator Collins in her statement.

Sen. Collins has also suggested transferring workers' compensation recipients to the federal retirement system when they reach retirement age. "These individuals should be switched to the retirement system. They're never going to return to work over age 90,” she has said.

Federal worker groups have opposed that idea, noting that injured federal employees have forfeited their right to sue the government in exchange for disability payments, among other issues.

The Washington Timesquotes Shelby Hallmark, director of the Office of Workers' Compensation Programs at the Department of Labor, who in 2004 testified to Congress about the problem.

"Under current law, the thousands of long-term FECA (Federal Employees' Compensation Act) beneficiaries who are over normal retirement age have a choice between federal retirement system benefits and FECA benefits, but they overwhelmingly elect the latter because FECA benefits are typically far more generous," Hallmark reportedly said.

The Times says a “2005 audit by the Office of Inspector General for the Veterans Administration found that beneficiaries can remain on workers' compensation rolls until they die.”

And it says “in 2003, the U.S. Postal Service's inspector general cited potential savings of $19 million over 10 years if only 255 totally disabled postal employees were required to retire.”

The Times says that “same report found there were 81 employees who had been collecting workers' compensation payments for between 40 and 50 years.”

The CBO report says that “FECA provides what could be considered a windfall for permanently disabled employees who otherwise would be retired, indefinitely paying them benefits that are higher than those offered by their retirement plans. “

And the CBO notes that “permanently disabled employees covered by the Federal Employees Retirement System can cash out the defined-contribution portion of their retirement plans in addition to receiving FECA benefits. The higher benefits could encourage some employees to claim to be disabled in order to raise their retirement income.”

Roughly 140,000 FECA claims were filed in 2006, the CBO says; of those, 55,000 federal employees received long-term replacement benefits (averaging about $36,000) for a job-related injury, disease, or death. About three-fourths of those beneficiaries received augmented benefits. More than 60 percent of the beneficiaries were at least 55 years old.

The CBO says that “such benefits are out of line with those of other workers' compensation systems.”

It adds that “only six state systems authorize additional benefits for employees with at least one dependent, and those benefits are much smaller—about $5 to $10 per week in five states and $25 per week in the sixth, compared with 8.33% of the worker's previous salary in the case of FECA, or about $80 per week for an employee making $50,000 per year. Moreover, salaries and other employee benefits do not increase for workers with dependents.

This is of a piece with what cities and towns are seeing across the country. Eight out of ten senior California Highway Patrol officers discover a disabling injury about a year before they retire, the Economist Magazine reports.

And according to an audit released in August 2010 by the Buffalo City Comptroller, the city spent $1.99 million in taxpayer funds on health insurance premiums for 152 deceased employees – some [of whom] had died as long ago as 1998.